Australian Broker 12.23

NEWS ASIC takes aim Banks and brokers feel the heat P6

ANALYSIS Unfair or fair game?

Are clawbacks ever justified?

P10

OPINION Due diligence in choosing a credit repairer What the government’s moves mean for you P12

NOVEMBER 2015 ISSUE 12.23

MARKET TALK GST and affordability How a GST hike could hit housing P22

FORUM Clawback backlash Brokers have their say on clawback clauses

P27

KEIRAN EVANS ANZ’s third party head on the bank’s home loan push P14

CAUGHT ON CAMERA Night of nights A look at this year’s AMAs P28

PROPERTY FOCUS 2

NEWS

ASSOCIATIONS

REGULATION

LENDERS

Drop in broker complaints

APRA’s investment crackdown working P6

Banks face RBA ire

P4

BROKERNEWS.COM.AU

IS AUSTRALIAN PROPERTY IN A BUBBLE?

BRISBANE

24% 70% 6%

YES NO NOT SURE

YES NO

MELBOURNE

NOT SURE

NO NOT SURE

SALES & MARKETING

Editor Adam Smith

Sales Manager Simon Kerslake

Journalist Maya Breen Production Editors Roslyn Meredith Moira Daniels

50% 50% 0%

Account Manager Rajan Khatak Marketing and Communications Manager Lisa Narroway

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

Designer Lea Valenzuela Traffic Coordinator Lou Gonzales

MELBOURNE YES

EDITORIAL

News Editor Julia Corderoy

SYDNEY

BRISBANE

SYDNEY

P8

Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

56% 44% 0%

EDITORIAL ENQUIRIES

Adam Smith +61 2 8437 4792 adam.smith@keymedia.com.au

Source: ATO

SUBSCRIPTION ENQUIRIES

tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

REAL ESTATE AGENT REPUTATION REPAIRED? The CoreLogic Consumer Perceptions of Real Estate Agents surveyed people who had recently sold their property using an agent in an attempt to gain a better understanding of people’s perception of the skills and behaviours of those in the profession.

According to the results of the survey, 66% of respondents had either an excellent or good experience with an agent, while 20% described their recent experience as average.

Ten per cent of respondents described their experience as poor, with another 4% describing it as disastrous.

More than two-thirds of respondents, 68%, said they would recommend the agent they had used to family or friends.

While many people may judge an agent’s performance on the ultimate result – the final sale price – CoreLogic’s Kylie Davis said a high sale price didn’t guarantee people where happy with their agent’s performance.

“Agents who received a better than expected price for their vendor, but failed the key skills of customer service and follow up, received very poor reviews,” Davis said.

“Our take aways from the survey were that agents who are truly serious about improving their performance can do so easily if they are genuine, do what they say they will do, and demonstrate to their clients that they have their best interests at heart,” she said.

ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, Toronto, Manila This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

ASSOCIATION HAPPENINGS 4

TOP OF THE LIST

BETTER EDUCATION BEHIND DROP IN COMPLAINTS

1,978 Debt purchasers and collectors received 1,978 consumer complaints, or 40.7% of total complaints to the Credit and Investments Ombudsman. This was followed by residential lenders and mortgage managers, who received 745 complaints and accounted for 15.4% of total complaints. Mortgage brokers and aggregators, at 6.1%, were fifth on the list.

Source: ABS

Finance brokers got some good news recently when it came to light that 2014-15 figures from the Credit and Investments Ombudsman (CIO) showed only 6.1% of consumer complaints related to brokers or aggregators. The result was a drop from the 6.9% levied against brokers and aggregators last year. FBAA chief executive Peter White said the drop was unsurprising given the quality of education available to the industry.

“The better we educate ourselves, the better we can explain to the customer what we are all about and why we have recommended a particular loan which most suits their needs,” White said.

CIO Ombudsman Raj Venga said the complaints that were received about brokers were generally service related.

“Specifically, consumers rely on the broker’s expertise to arrange a

A rundown of the next fortnight’s events

NOVEMBER

24 Raj Venga

suitable loan for them and make a complaint when they consider that the loan is not in fact suitable for them, the broker did not inform them about certain key features or terms of the loan they arranged, or the broker failed to inform them about other options or features which were available,” he said.

WHAT THEY SAID...

Phillip Lowe “It is disappointing that some lenders’ internal systems have not been up to the task of reporting accurate data on the split between investor and owneroccupied housing loans” P8

Kevin Lee “Not only has APRA penalised investors but they have also penalised owneroccupiers who have an interest-only home loan” P20

DATES TO WATCH

Tim Lawless “While we don’t envisage dwelling values will fall substantially, the probability of declines in Sydney, and to a lesser extent in Melbourne, after such a strong run of capital gains isn’t unlikely” P23

What: Avoiding mortgage fraud Where: Online The particulars: This MFAA training course teaches brokers to detect the most common types of mortgage fraud and how to avoid falling victim.

NOVEMBER

DECEMBER

25 - 4

What: MFAA state-based Christmas parties and CEO wrap up Where: Throughout Australia The particulars: MFAA CEO Siobhan Hayden will be travelling the country to celebrate the Christmas season with brokers and discuss what the MFAA has done over the year, as well as what it has planned for the year ahead.

DECEMBER

1

What: Final 2015 RBA Board meeting Where: Sydney The particulars: The Reserve Bank will hold its final cash rate meeting for the year. After holding rates on Melbourne Cup Day, will the Central Bank deliver a Christmas surprise?

REGULATORY ROUNDUP 6

WORLD NEWS

APRA’S REACH

The latest monthly banking figures released by APRA show loans to investors dropped almost $2.6 billion in September. Aggregate year-on-year growth is now comfortably below APRA’s 10% limit at 8.4%, with $41.2 billion investment loans settled over the year.

loans to investors dropped

year-on-year growth

$2.6 billion

8.4%

investment loans

settled over the year

$41.2 billion

Source: APRA

UNITED STATES DEVELOPER DEFRAUDS US PROFESSIONALS Former Michigan-based real estate developer Charles Gahan was sentenced for his part in a US$8m “mortgage stacking” scheme.

Sentencing was handed down by US District Judge Robert Holmes Bell, who ordered Gahan to five years and 10 months in prison. Following his release Gahan will spend five years under supervision, according to local Michigan-based news publication MLive.

He was also ordered to pay US$8,205,405 in restitution.

Gahan’s co-defendant, former owner of Prime Title Services Scott Hoeft, is currently serving over three years in prison for his role.

“The essence of the fraud was that Mr. Hoeft assisted Gahan in obtaining construction loan financing by agreeing to provide the prospective lenders with fraudulent title commitments that purposefully failed to disclose the existence of prior liens against the property upon which new homes would be constructed,” Assistant US Attorney Ronald Stella wrote in court documents, according to MLive.

The two allegedly defrauded banks, lenders and title companies by taking out multiple mortgages without the proper disclosure of prior liens. Hoeft allegedly wrote the insurance policies.

ASIC HITS BANKS AND BROKERS ASIC has dealt out regulatory action to lenders and brokers alike over the last few weeks. First, the watchdog took aim at a Melbourne broker, issuing him a permanent ban and cancelling the licence of his company. ASIC said Melbourne broker John Cilmi recklessly submitted false or misleading documents to secure three separate loan applications.

But the regulator also went after the big banks. ASIC announced that Westpac would have to refund more than 10,600 home loan protection insurance customers on any premiums

paid for insurance cover they didn’t need.

According to an ASIC investigation, ASIC was concerned that Westpac had been collecting premiums before a home loan was drawn down, after a home loan was repaid or where a customer did not go ahead with a home loan.

GE Money also felt ASIC’s sting when the regulator raised concerns over misleading advertising.

ASIC said GE Money’s ads, which claimed to offer “one of the best rates in the market”, were subject to riskbased pricing that could see consumers paying up to 34.95%.

LENDER UPDATE 8

MUTUALS TURNING THE CORNER

LENDER NEWS

A rundown of the fortnight’s policy and price changes

RATES

3.1% BANKS FACING EVEN MORE REGULATOR SCRUTINY Australia’s banks have found themselves under an extraordinary amount of scrutiny of late, particularly when it comes to home lending. The scrutiny looks set to intensify, with regulators set to comb through lenders’ mortgage books after the reclassification of $50bn worth of mortgages. RBA deputy governor Phillip Lowe criticised the revision in figures at a recent speech at the FINSIA Regulators Panel in Sydney.

“It is disappointing that some lenders’ internal systems have not been up to the task of reporting accurate data on the split between investor and owner-occupied housing loans.”

And the increased scrutiny may not abate, with the RBA recently stating that APRA’s more vigilant approach was having the desired result. Speaking at the Australian Property Institute’s Queensland Property Conference in the Gold Coast on Friday, Reserve Bank assistant governor Malcolm Edey said tougher regulations imposed by APRA coupled with the major banks’ decision to increase mortgage rates were correcting the lax lending standards.

“It will take time for the full impact of these measures, and of the more recently announced increases in bank lending rates, to become apparent. Nonetheless, the indications to date are that the supervisory measures are having a beneficial effect on lending standards and are assisting in restraining new investor finance.”

Adelaide Bank Increases standard residential variable interest rates, effective Friday, 20 November. Rates will increase by 0.07% p.a. to 4.21%. for Smart Saver loans, by 0.12% p.a. to 4.26%. for SmartFit loans, by 0.12% p.a. to 4.66%. for Smart Saver investor loans and by 0.17% p.a. to 4.71%. for SmartFit investor loans.

A new report shows the mutual sector’s total profits before tax increased by 3.1% to $624m while capital levels were at 17.8%, compared with 13.4% for the major banks.

Source: KPMG

BY THE NUMBERS

3 million A report from the National Credit Providers Association (NCPA) claims more than 3 million Australians, or 16.9% of the adult population, are either fully excluded or severely excluded from financial services Source: NCPA

Bankwest Increases variable home loan interest rates by 18 basis points for owner occupiers to 5.65% p.a. (5.70% p.a. comparison rate) and to 5.97% p.a.

(6.02% p.a. comparison rate) for investors, effective 17 November 2015.

CUA Decreases Fresh Start Basic variable home loan rate for owner occupiers by 0.14% to 3.99% p.a., effective 24 November 2015.

Also decreases 3-year fixed rate for owner occupiers by 0.16% to 4.09% p.a.

Heritage Bank Decreases home loan rates to 3.98% for its special Discount Variable home loan rate, for owner-occupier loans of more than $150,000, with a maximum LVR of 90%.

The same rate now applies to its Home Advantage Variable package product, for a loan of $700,000 or more. Both effective from 5 November 2015.

ME Increases variable home loan interest rates by 0.20% to 5.08% p.a. (comparison rate 5.09% p.a.) for its Flexible Home Loan effective 20 November 2015.

POLICY

Thinktank Commercial Lifts its maximum loan term for Mid Doc loans from 25 years to 30 years.

10

ANALYSIS

COULD BANK PROFITS HAVE PLATEAUED? Investor lending has been cooling since APRA placed restrictions on annual growth in loans to investors. In the latest figures released by the Australian Bureau of Statistics, investor lending suffered its largest drop in seven years, tumbling 8.5% in September. Further increased scrutiny on investment lending could dampen the lucrative mortgage market, which accounts for 41% of the major banks’ total asset base, and jeopardise their profit margins.

In addition, the chairman of Australia’s fifth largest lender Bendigo and Adelaide Bank, Robert Johanson, said that the reign of high returns to shareholders is also likely to come to an end.

“Banking in Australia has enjoyed a long period of high returns on capital being generated for shareholders. We expect that over time these rates of return will reduce,” he told the bank’s AGM. “This seems inevitable in an economy where the risk free rate is at all-time low levels, and where around the world returns on capital employed in banks are much lower than in Australia.

“We do need Australian banks to be, as the Murray report found, unquestionably strong to ensure ready access to international capital markets.”

BROKER ASSOCIATION HEADS AT ODDS OVER CLAWBACKS A question of ethics regarding clawbacks has the heads of the MFAA and FBAA at odds over their purpose and their right in third party lending THIS YEAR’S financial reporting season has just wrapped up, with Australian banks reporting record profit margins despite facing rampant competition, regulatory headwinds and a slowing property market.

So with bank profits continuing to rise, it brings with it a question of ethics which has the heads of the two major broker associations at odds: should upfront commission clawbacks be reviewed or possibly scrapped altogether?

Unreasonable and unnecessary Speaking to Australian Broker, the chief executive of the FBAA, Peter White, said that clawing back a broker’s income is fundamentally wrong and it is time the industry took a stand against “unreasonable” commission clawbacks.

“I have always believed that upfront clawbacks have

been wrong. You do your job and complete your job and circumstances outside your control mean that things change and you lose your income – that is just not right. It is fundamentally not fair.”

Only in rare cases, according to White, is a clawback ever appropriate, particularly in an environment where lenders are competing fiercely to gain more market share from the lucrative residential mortgage sector. “[If] a broker did something wrong – they were in breach of their contract or they were churning – then clawbacks are appropriate. However, if a broker has done nothing and the bank has refinanced it or another bank has come out with a better offer all of a sudden and the client has walked and a broker can’t stop it – why should they be penalised for that?”

Not only is clawing

back someone’s income wrong, White says brokers are amongst the only professionals who are subject to commission clawbacks.

“Banks don’t penalise the bank loan officers if a loan gets turned over in 12 months’ time. The bank officer doesn’t lose their salary. It should be no different with the broker.

Clawbacks are here to stay On the opposite side of the argument is the chief executive of the MFAA, Siobhan Hayden, who said that whilst she agrees that clawbacks remain a point of frustration for finance brokers, it is not reasonable to expect clawback provisions to be removed altogether.

According to Hayden, removing clawbacks isn’t so simple considering it is linked to how lenders structure their third party

commissions.

“Clawback is directly linked to how lenders price their product within our channel and the MFAA accepts that it is not reasonable to expect clawback provisions to be removed altogether.

On top of that, MFAA statistics reveal that only 1-2% of total loans transacted within a year are exposed to a clawback and therefore does not constitute a major business issue for the majority of finance brokers.

A better solution for brokers, according to Hayden, would be to focus on educating consumers on clawback provisions rather than fighting to ban them.

An initial step for finance brokers is to ensure that

BANKS’ BALLOONING PROFIT MARGINS

NAB increased its NPAT by 20% in FY15, to $6.3 billion

Westpac increased its NPAT by 6% in FY15, to $8.01 billion

CBA increased its NPAT by 5% in FY15, to $9.06 billion

11

CONNECT WITH US Got a story, suggestion, or just want to find out some more information?

COMMERCIAL LENDING UPDATE

HOW TO MAKE MORE MONEY IN 2016 How does 2016 look for Chifley Securities and the general broker segment in 2016?

After a very strong start in our first year with more than $400 million worth of deals and some 270 applications, Chifley Securities is poised for a very strong 2016.

We have created partnerships with over 2,000 brokers and with a lending pool of $700 million we are ready to fund property-backed projects ranging from $1 million to $50 million.

We are offering our broker network commissions, following settlement, of an average 1.1% and are keen to expand our reach further across Australia, after handling transactions in all mainland capital cities for developers, commercial investors, owner occupiers, hoteliers and residual residential refinance.

they educate their customers on how clawback provisions work and that their disclosure documentation includes a clawback term.”

Accepting that clawbacks will remain a part of doing business, Hayden said the MFAA has partnered with lenders to challenge lenders to adopt ‘broker bestpractice’ for the industry, such as ensuring that any lender enquiries from a broker-introduced loan are redirected back to the broker.

“NAB and ANZ are two lenders that have adopted this policy to the betterment of the industry,” Hayden said.

“I would like to see all lenders adopt policies that continue to support brokers as well as help prevent any further contraction in real broker earnings.”

In addition to lenders, aggregators such as Connective, FAST and AFG have all confirmed to the MFAA that they would intervene and support brokers where clawback provisions have been clearly explained but the broker was still unfairly penalised.

“This could include the sale of an asset after 23 months, on a 24 month clawback.

“Aggregators all agreed that where the finance broker has continually demonstrated sound business practices and the clawback is due to circumstances outside the broker’s control, then clawback can be negotiated.

A reduction or scalability of the clawback is also an option.”

ANZ increased is NPAT by 3% in FY15, to $7.5 billion

What will be the major opportunities for brokers over the next year?

The Loan Refinancing sector is turning out to be the biggest area where loans are received and Brokers haven’t even touched the surface yet. This area is virtually untapped and is the greatest area of growth for Brokers in 2016.

Loan Refinancing is where a borrower who you have previously brokered into a financial institution has gone into default or is about to go into default. Brokers now have the opportunity to refinance these loans in the private sector such as with Chifley Securities, instead of allowing the loan to be placed in the hands of Receivers where the result is almost never in favour of the borrower.

Chifley Securities and its sister company Nationwide Capital specialise in refinancing loans where there is ATO action and outstanding debts; the threat of liquidation or even a Receiver appointed with the purpose of providing the borrower with a second chance.

Brokers have a responsibility to ensure that when their clients find themselves in trouble, they provide them with the best options for solutions and that will almost always include a review from Chifley Securities.

What opportunities do the major banks provide for Brokers working in the private loan sector?

Major Banks provide a number of opportunities for Brokers in today’s private loan market.

Joe Morello

Following from the previous question, the amount of Loan Refinance opportunities in particular from the major banks is very large. When you couple this with the fact that there is a growing trend by the major banks to move away from appointing Receivers on defaulting loans and go down the route of mortgagee in possession; Brokers are provided with an enormous bank of opportunities from which they can refinance defaulting facilities.

Outside the opportunities surrounding refinancing, the major banks have tightened the requirements surrounding commercial lending. This doesn’t have to become a problem for Borrowers and Brokers, as private lenders companies like Chifley Securities provide finance to fill this gap in the market.

In fact Chifley Securities has a strategic partnership with specialist private lenders to fulfil almost any loan finance requirement.

In the past 12 months, Chifley Securities has provided loans utilising existing valuations; managed to provide bridging finance for numerous commercial projects; source mezzanine and equity contributions to be attached to senior debt for property developments and provide finance approvals on the basis of valuations when they were above cost.

In the sector of refinance, Chifley Securities has refinanced property in order to remove Receivers; arranged for cash outs to pay for ATO and other debts; and refinance defaulting loans to provide borrowers with a second chance.

2016 can certainly be an opportunity for brokers to think outside the square and capitalise on business finance opportunities well outside what the major banks provide.

12

OPINION REPORTING ON CREDIT REPORTING

A breakdown of Credit and Investment Ombudsman complaints about credit reporting companies

36.5%

Incorrect default information

14.6%

Incorrect judgment information

9.8%

Incorrect bankruptcy information

7.3%

Breach of the Australian Privacy Principles

4.9%

Incorrect enquiry information

DO YOUR CREDIT REPAIR HOMEWORK Merrilyn Mansfield warns brokers to do their due diligence before recommending credit repairers to their clients IT IS not cool in Australia to blow your own

4.9%

Credit report incorrectly linked

4.9%

Personal information incorrect

4.9%

Other Source: CIO

trumpet, right? But what do you do when you know certain competitors are failing to do proper investigations for their clients with credit impairments and your company continually picks up the pieces? To be frank, I am amazed that some clients trust us at all after what they have been through.

Take Sam,* who was referred to us over a month ago with four overdue accounts on his credit file. They had all been sold to debt collectors. They were a personal loan with Bankwest (sold to Pioneer) for $39,000, a NAB credit card (sold to Credit Corp) for $4,700, another personal loan with Great Western Asset Management (sold to Panthera) for $7,865, and finally a CBA credit card (sold to Credit Corp) for $36,000.

The previous credit repair company had charged a large sum and had achieved one removal out of the four, which was now back on his credit file because the outstanding debt had not been

resolved and so the company relisted him. So, basically they had done nothing except take Sam’s money. He was in exactly the same position as he was when he approached that company.

The client emailed me the paperwork from the credit repair company showing what had transpired on the default removals, which appeared to be no more than a cut and paste of the outcome of

When sourcing a credit repair company, Google is not your client’s best friend a Veda complaint that had been popped into a “Listings Cannot be Removed” letter to the client.

Yet, from the information provided by the client, I immediately saw how a case could be successfully won, based on breaches of the legislation.

This is how the removals transpired: • On 10 September 2015 the CBA/Credit Corp default listing was removed because of an

13

Dr Merrilyn Mansfield is a consumer advocate at PRINCEVILLE CREDIT ADVOCATES

error. The debt was reduced from $35,860 to $28,700, to be paid over time.

• Four days later, on 14 September 2015, the NAB/Credit Corp default listing was removed because of an error and the debt was reduced from $4,700 to $3,800 (paid on removal).

• Two days later, on 16 September 2015, the GWAM/Panthera default listing was removed because of an error and the debt of $7865.68 was paid on removal (no reduction).

• On 30 September 2015 the Bankwest/Pioneer default listing was removed because of an error and the debt was reduced from $39,000 to $23,000, payable over time.

• We received a Veda and a Dun and Bradstreet report confirming all listings had been erased (as the client had told us that some listings were on both reports). The broker, who had been kept in the loop throughout the process, was over the moon, as was the client.

I’m blowing this trumpet not to pat myself and my team on the back but to give a shout out to brokers who refer clients to

credit repair companies that are not doing their job. It is unfair on the client to expose them to low-quality operators who simply take their money and no nothing.

Other poor practices we see are where a credit repair company sells the client a pack of template letters for over $1,000 and tells them to do the work themselves. The client sends the letters to the credit provider, as instructed, and the credit provider says no, there is no error, and won’t remove the listing/s. The client tries to contact the credit repair company for assistance, but they won’t return their calls. Bad news.

Another bad practice is credit repair companies putting clients into Part 9 debt agreements (effectively, bankruptcy) when this is not the best solution for the clients. Or into high-interest loans when they haven’t done a proper investigation of the listings on the credit file. They tell the client that there was no error (how could they know?) and say the only options open to the client are a Part 9, or alternatively, a high-interest loan. Part 9s stay on the NPII bankruptcy register for life. This is credit repair as clickbait at its worst.

Other credit repair companies use a no-win no-fee model to cherry-pick what they regard as easy listings to erase, and leave the difficult ones (those that affect the credit score most dramatically) on the credit file, which means the client still potentially can’t get a low-interest loan. Of course they tell the client that their investigation has proved the hard listings were correct and couldn’t be removed. This can’t be right as we eventually get to work on these cases and often get the hard listings removed through a proper investigation and application of the legislation.

Then there are the companies that say they can get a listing erased in two days, or five days, or two weeks, when the legislation allows a credit provider 30–45 days to respond to a complaint. The client jumps in and buys that service and their dreams are shattered shortly afterwards when they have already paid a deposit on a house based on these false promises (sometimes the client loses the deposit).

Hint: When sourcing a credit repair company, Google is not your client’s best friend. As a general rule, the companies that advertise on Google tend to spend a small fortune on AdWords and have fees that reflect this, often up to 50% higher than other companies charge. I met someone at a PD day recently who spent $2,000 with a credit repair company that advertises extensively online. Our fees in comparison: $1,300, most of which is refundable if we are unsuccessful. At least part of the difference: costly advertising.

My advice: Develop a relationship with a trusted credit repair advocate and refer to them (try them out first if you are not convinced), rather than throwing your client to the proverbial credit repair wolves.

Your clients will thank you and so will their hip pockets.

14

COVER STORY ANZ’S HOME 954,000 LOAN PUSH $231bn

A LOOK AT ANZ’S HOME LOAN PORTFOLIO

Total number of home loans:

Total value:

The major bank has been gaining broker market share, and Keiran Evans says it’s all about remaining customer-focused

Owner occupied loans account for 61% ANZ HAS been quite transparent about its

61% Investor loans account for 39%

39% 42% of home loan portfolio ahead on repayments

42% Average loan size at origination:

$389,000 Average LVR at origination:

71% First home buyers account for 7%

7% Source: ANZ

plans to take a bigger share of the mortgage market. The bank’s incoming chief executive Shayne Elliott flagged a more aggressive push into mortgages in a recent Fairfax interview.

And this push largely relies on buy-in from brokers. The bank’s full-year results showed brokers accounted for 48% of the loans settled through the bank in FY15. That was a slight increase on the 47% coming through the channel the year before. ANZ head of third party relationship channels, Keiran Evans, said the push to capture more third party business comes back to customers.

“Everything we do is about the customer. Our catch cry is ‘helping brokers help the customer’,” he said.

“It’s about removing roadblocks; hearing what the issues are and then addressing those issues. That filters down from myself through to the state managers and BDMs. We all go out and talk to brokers, listen to them and take their suggestions,” Evans said. “That comes back to having BDMs skilled in communicating what ANZ delivers to customers. It’s about making sure brokers are fully informed as to ANZ’s offer.”

State-based push New South Wales is a market of particular focus for ANZ. Shayne Elliott told Fairfax the bank would look to grow more aggressively in the state.

“We used to joke we were the number five

“Dealing with brokers has enabled us to get a jumpstart, and now be positioned as number one or two in market share with each of the major aggregators in NSW” Evans said there was a consumer-led shift toward brokers, and the third party proposition was increasingly attractive to consumers. And this means the bank must make sure its own proposition to the third party is clear, Evans suggested.

With this in mind, Evans said ANZ has focused strongly on its BDM team.

“We’ve expanded our BDM salesforce significantly. We’ve trained our BDMs not just in product knowledge, but in listening skills and in presentation skills. It’s all enabling them to better communicate with brokers,” he said.

This communication means the bank must be sensitive to broker feedback, Evans said.

He highlighted the importance of listening to brokers’ needs and concerns, and addressing them.

bank of four in NSW, which is true, and it’s not just Sydney, it’s right across the state. NSW is one of our priorities,” he told Fairfax, noting that the other majors and Westpac subsidiary St.George outperformed ANZ in NSW. Evans said this means a specific focus on NSW brokers, as the bank’s branch network is not as strong in the state as its major bank rivals.

“In the proprietary sense, our footprint is not as big in NSW, and that is something we as a bank want to remedy. Dealing with brokers has enabled us to get a jumpstart, and now be positioned as number one or two in market share with each of the major aggregators in NSW,” Evans said.

One of the ways ANZ is looking to continue to grow in the market is through strategic recruitment of BDMs, Evans said.

15

“It’s no secret that there’s a large Asian demographic in Sydney, so we’ve recruited multilingual BDMs, and that works really well with brokers in that area,” Evans said.

This is a market that makes sense for ANZ, Evans indicated. With the bank’s reach beyond Australia’s borders, it already has high brand visibility in some of the overseas markets bringing investors to Australia.

“One of our strengths is we are a superregional bank. We have a great presence in Asia.

So it’s about matching those super-regional capabilities with boots on the ground in Australia,” Evans said.

Improving the process Evans said the bank has also worked hard to streamline processes and tighten turnaround times through a number of technological improvements. He pointed to electronic delivery of letters of offer and security documents, as well as the ability for brokers to electronically upload documents.

“We’re getting good feedback from brokers that we’re making their lives easier,” he said.

Evans said the bank’s pricing tools and online loan change request capabilities were also helping brokers deliver better outcomes to customers.

“It’s a quicker decision to brokers and it

enhances the customer experience. Everything we do has to be about the end customer and helping brokers deliver to those customers. We have to look at the entire value chain.”

In looking across the value chain, Evans said it also makes sense to deliver value to brokers in the form of continuing education. He said ANZ had been very active in delivering training to brokers, and was continuing to find new ways to add value through education.

“It’s fair to say we’ve had a breakthrough with the webinars we piloted in late July. These webinars have MFAA and FBAA accreditation, so brokers receive CPD points,” he said.

Evans said the sessions have had excellent uptake, and delivered training across a range of topics.

“Brokers are really voting with their feet on these. We’re providing a skillset that is resonating with brokers.”

But the skillset isn’t just about enhancing broker business through ANZ, Evans said. He said the bank was delivering training that would help the industry as a whole, and ultimately the end customer.

“Other financiers might have subtly different requirements. Industry training is not just training how to do an ANZ loan. We’re delivering a transferrable skill,” Evans said.

ANZ’S NEW CHIEF Earlier this year, ANZ announced that Shayne Elliott would become the bank’s new chief executive officer, succeeding Mike Smith on 1 January 2016.

Elliott is currently ANZ’s chief financial officer, responsible for all aspects of finance as well as group strategy, legal, treasury, investor relations and mergers and acquisitions.

Originally from New Zealand, Elliott has over 30 years’ experience in international banking including in Australia, New Zealand, Asia Pacific and the Middle East.

He joined ANZ as CEO Institutional in June 2009.

He has held senior positions in Citigroup in Australia and New Zealand, the UK, USA, Asia Pacific and in the Middle East. Prior to joining ANZ, Elliott was a senior executive with the investment bank EFG Hermes. For the past three years he has been ANZ’s CFO. Smith will step down after eight years as chief executive officer and as a director on 31 December 2015.

ANZ chairman David Gonski said Smith had transformed ANZ into Australia’s only international bank with a focus on Asia Pacific.

“Mike was appointed chief executive as the world was entering the global financial crisis. Despite those headwinds and a volatile environment for banks around the world, his leadership has seen ANZ continue to grow market share in Australia and establish a strong, growing New Zealand business under one brand.

“He has transformed ANZ into one of Asia Pacific’s leading banks with operations in 34 countries, delivering strong outcomes for our customers and for our shareholders.”

Smith will be retained as a non-executive advisor to the Board, initially for one year.

16

COALFACE FOOTBALL, FINANCE AND FAST GROWTH

A STORIED CAREER

Some milestones from Dom Cassisi’s AFL career Draft history

2000 National Draft Pick 50 – Port Adelaide

Take a look behind the scenes of one of the industry’s fastest growing brokerages, headed by ex-AFL legend Dom Cassisi ONE OF his most influential coaches once told him that if you work hard, you get what you deserve. And that’s exactly what Premiership winning footballer and former Port Adelaide Club captain Dom Cassisi has done throughout his AFL and finance careers.

The same as with professional sport, there are no shortcuts in business but “it’s a bit easier on the body – finance broking”, says Cassisi.

Managing director of brokerage Funding Options in Norwood, Adelaide, Cassisi launched into full-time broking after he retired from a 15-year career in football.

Now just over a year into the business, Cassisi has already received the Rising Star Award for the 2014/2015 year at the Australian Finance Group’s High Achievers Gala Dinner which is based on volume of business written by a new entrant in broking.

AFG state manager Alan Walker congratulated Cassisi on the achievement saying, “Dom’s impressive business results are a testament to the fact he is able to bring his leadership skills from the footy field to the finance field.”

Build strong relationships and growth will follow Funding Options’ strong growth in a short timeframe is not a result of expensive marketing and internet sourced leads Cassisi points out, but through building strong relationships with a number of linked providers – including real estate professionals, accounting, conveyancing, financial planning, general insurance providers, risk and life insurance, building inspections and a vehicle supplier.

Forging these ties was a high priority from the start, particularly their connection with the biggest independent realestate company in South Australia, Toop&Toop, playing a key role.

“The initial reason to set up the business was to form a strong alliance with them and we’ve generated a lot of home loans from them,” says Cassisi. “They have big presence in property management and we help landlords refinance.”

The brokerage also offered commercial lending, equipment and motor vehicle finance right from the beginning.

“It’s the holistic approach of being able to provide lending for basically most things which I think has set us apart a bit and which has been great for client retention.”

An example of this involves one of his best clients who was selling a house and which they helped in financing his next purchase. This then led to assisting in refinancing his investment property and also more unusually, a flight simulator from the US and two aircraft, as the client had just bought a flying school in Adelaide. Over the next 18 months, they financed each addition to his fleet, which grew from six to 16 aircraft.

Cassisi says it was daunting to start a business and finding the answers to questions like how they would contact people going through open homes; their strategy for landlord business; and how to target external referral partners like accountants and financial planners early on.

“But I was always passionate about property and finance and I got to know a broker here in Adelaide with a really good business and asked him about the path into the industry.”

And the challenges have been worth it as Cassisi explains it is in meeting new people each day that is the best part of the job.

“Whether you’re assisting someone buying their first home or sitting down to do a big commercial deal – no matter the value of the deal, it’s really about getting to know someone new and helping them achieve what they want to achieve.”

Bringing lessons from football into finance Drafted into the Port Adelaide Football club at 18 years of age and after a long, successful sporting career, the transition from football to finance was a big change. But after playing over 200 AFL games, Cassisi has brought his leadership experience from the locker rooms to the office.

“When you’re playing professional sport you’re always looking at ways to improve,” says Cassisi. “You’re always analysing your performance and not always going to get to play the perfect game. So you might have prepared really well but you’re going to face problems whether that be in-game or during the week and you have to work out a way to overcome them and that directly relates to what I’m doing now.”

He reflects on how playing professional sport in front of large crowds demands good decision making under pressure and this clarity of thought is mirrored in business as well.

“My only focus is doing the little things well. That’s my whole ethos – do the little things well,” says Cassisi. “I can set goals and say I’ll settle $80 million worth of loans but that’s not achievable unless you’re doing the little things well each day, with each deal and with each conversation.

“Little things all add up, creating big momentum and once you’ve got that momentum going it’s pretty hard to move it. I’ve never been big on setting goals because I think you can lose focus on what has to be done now, today and tomorrow.”

Recruited from

East Fremantle

Aligned SANFL Club

West Adelaide Previous Clubs

East Fremantle Junior Club

Maddington AFL Debut

Rd 14, 2002 v Fremantle PAFC Debut

Rd 14, 2002 v Fremantle

50

Games 50 AFL games

100

100 AFL games

150 200

Rd 7, 2005 v Kangaroos

Rd 18, 2007 v Adelaide 150 AFL games

Rd 1, 2010 v North Melbourne

200 AFL games

Rd 20, 2012 v Hawthorn 50 goals

Rd 17, 2008 v Fremantle Source: Port Adelaide FC

TECHNOLOGY UPDATE

INDUSTRY-FIRST PROGRAM AND MARKET CONDITIONS PROVIDE DUAL OPPORTUNITIES FOR BROKERS

Paul Liccione, General Manager – Sales and Distribution

With interest rates in a state of flux and sale activity in the property market flattening off during an usually busy period, now is the perfect time to really market your database, says leading aggregator eChoice.

General Manager of Sales and Distribution, Paul Liccione, says while analysts remain divided on the exact timing of the next interest rate change and with some majors now independently moving rates, brokers should be thinking about taking advantage of this extraordinary time.

Liccione says: “Brokers need to adjust to this new normal for the market and act before others get in before them. However, they also need to bear in mind that as the festive season approaches this is also the time borrowers start reviewing their loan and financial obligations for the year ahead.

This is why now offers dual opportunities for brokers.”

And according to Liccione, a growing number of savvy and time-poor brokers can now access a business solution which allows them to mine their database and meet the demands of the current market.

‘Concierge’ for brokers In an industry first, the eChoice Concierge phone support program offers a business communication platform for brokers to reach out to borrowers during a time when they may be looking for more certainty

around their arrangements or are simply just considering change.

Liccione says: “On-boarding with the program allows the broker to have a specialist and experienced industry professional reconnect with clients on their behalf and investigate whether the

continue to be a dormant segment of their database. It’s a win-win for both the broker and the borrower.”

Since eChoice launched the company’s Concierge service in April this year, the statistics speak for themselves in terms of its success.

More than 200 new loan and refinance referrals have been generated by the Concierge team over that period from participating brokers’ databases and a typical one-day phone campaign for a broker is seeing a multiple of twenty times the initial investment added to their business revenue, while the broker continues their day-to-day activities.

Liccione says: “Those brokers with a database of existing customers and past leads now view the Concierge team as a business partner with the skills and experience to make contact on their behalf, without carrying the cost of having an employee.

“It’s not surprising the response from brokers has been phenomenal. We are expecting activity in the upcoming season to increase markedly as more brokers see the significant financial return on what is a relatively small investment for their business,” he added.

Business building platform eChoice has unveiled a suite of cutting edge business building solutions for their broker network this year, allowing brokers to customise which tools are most effective to meet their needs.

“Through our partnerships with key industry groups such as Fairfax’s Domain, we now dominate the lead generation space and know exactly what consumers want.

This allows us to apply that knowledge to develop tools brokers can use to immediately connect and empower the borrower, so the relationship thrives in the long term and adds to creating a more sustainable business,” says Liccione.

The aggregator will continue to roll out new programs and initiatives as it utilises its in-house capability to create bespoke tools and platforms for the market, while at the

“The eChoice Concierge is a secret weapon for brokers. Being able to have a respected team of industry specialists mining your database to unearth new opportunities is much like relying on a trusted business partner to divide and conquer. This service is not only futureproofing broker businesses, but is re-shaping the call centre landscape in the process” borrower’s needs have changed and if they have, whether they can be met more fully.

By re-establishing that contact it offers a timely and effective opportunity for the broker to monetise what may otherwise

same time expanding its broker network.

“We are not just focused on what the broker needs for today, but are already creating the tools for tomorrow,” adds Liccione.

18

BUSINESS PROFILE 6 STEPS TO A PROFITABLE PROPERTY INVESTMENT Chris Gray, property expert and author of The Effortless Empire - Building wealth from property, has dished his top tips for choosing the best investment property.

1 Choose property that’s attractive to tenants It should be clean, have good-sized bedrooms, ideally with off-street parking, and good positioning away from noise and main roads.

2 Choose property that will grow in value If the property is close to a major CBD, beaches, schools, public transport and leisure facilities, it’s more likely to grow by more than the average in a good market and is more likely to hold its value in a down market.

3 Buy blue chip It’s often worth paying market value for a good property in a top suburb than it is to get a discount for something that no one else really wants.

4 Create instant equity For every dollar you spend on renovating you should be aiming to get at least $1-2 back in the value of your property.

5 Refinance your property to create a buffer When your property grows in value, refinancing can create an emergency cash buffer zone. A cash buffer will ensure you can continue to make mortgage repayments even if you lose your job.

6 Re-sign your tenants Aim to tie your tenant down to 12 month agreements, to help guarantee your rental income.

SMARTLINE CASTLE HILL: MORE THAN JUST A MORTGAGE Kevin Lee, owner of Smartline Castle Hill, talks about being a property investment adviser, buyer’s agent and mortgage broker FOR KEVIN LEE, owner of Smartline

One size does not fit all

Castle Hill, the business of mortgage broking was always more than just the home loan transaction. As a seasoned property investor himself, Lee has always strived to provide his clients with smart, no-nonsense property investment advice along with their home loan.

His love of sharing his property investment

Diversification has been a major trend in the mortgage and finance industry in 2015 but diversification into property investment advice, according to Lee, isn’t necessary the best move for every broker as it is more than just earning another income stream.

“I don’t think diversification into property

“I don’t think diversification into property investment advice is good for all brokers because not all brokers are born equal – like accountants are not all born equal and like lawyers are not all born equal” experience and expertise with his mortgage clients eventually led him to officially diversify into property investment advice, opening his own property investment advice and buyer’s agency, Smart Property Advisers, to work alongside his Smartline mortgage franchise.

However, whilst diversifying into property investment advice was a no-brainer for Lee, he says it might not be suitable for all mortgage brokers.

investment advice is good for all brokers because not all brokers are born equal – like accountants are not all born equal and like lawyers are not all born equal,” he told Australian Broker.

“We have seen some examples of that in your magazine over the years and I think that is what we have really got to take into account – the skill set of the broker, as opposed to whether they can earn another income stream because it

19

Kevin Lee, Smartline Castle Hill

is not about that, it is about doing what is best for the client.”

When a broker jumps into property investment advice for a quick buck is when you start to see “secret commissions”, which Lee says is rife in the industry at the moment.

“I think [secret commissions are] very prevalent in the property investment space at large and the ramifications to the consumer are that most of these people are paying within their purchase price and they don’t know it. That is the biggest issue. For someone to be selling a property or to be introducing a property to a client purely because of the commission they are going to get is wrong. It should be outlawed and it hasn’t been,” Lee told Australian Broker.

“I have seen a number of clients over the years fall victim to that and we have some contracts on the table at the moment where we have found clauses within the contract that have made the lender very nervous and reduce the LVR to a maximum of 55%, which is outrageously low.

“This means the client has to put a couple of hundred thousand dollars more of their own money into the deal if they want to settle. The problem with that is the contact is from 2011 so it is quite old and for those clients to get out they will forfeit their deposit they have already paid and they will be sued by the developer for everything they lose if they resell the property for less than what these people agreed to purchase at.”

The best property investment advisers, according to Lee, not only have a passion for investing in housing but are experienced property investors themselves.

“One of the problems in the investment property arena has always been a lot of people who talk to talk but don’t have any track record of their own.

“I think being able to understand firsthand and talk to your clients and advise them and guide them through the process, you need to be an investor yourself. You need to have handled

BUSINESS PROFILE 20

STATE OF THE HOUSING MARKET

3.1%

0.6%

Sydney monthly capital gain

Melbourne monthly capital gain

-.02%

1.5%

Brisbane monthly capital loss

Adelaide monthly capital gain

-2.8%

1.4%

Perth monthly capital loss

Hobart monthly capital gain

-0.1%

1.5%

Darwin monthly capital loss

Canberra monthly capital gain

Source: CoreLogic RP Data October Rental Index

STATE OF THE RENTAL MARKET

0.1%

0%

Monthly increase in Sydney rents

Monthly increase in Melbourne rent

-0.7%

-0.9%

Monthy decrease in Brisbane rents

Monthly decrease in Adelaide rents

-2.9%

-0.4%

Monthly decrease in Perth rents

Monthly decrease in Hobart rents

-4.7%

-0.6%

Monthly decrease in Darwin rents

Monthly decrease in Canberra rents

Source: CoreLogic RP Data October Rental Index

a lot of investment loans and a lot of investment transactions yourself with both the lenders involved and the lawyers involved. Then you will start to get a level of experience that allows you to actually guide people, because that is what they come to you for.”

A complex market indeed

The investment landscape has faced significant regulatory headwinds this year following APRA’s warning to banks to keep annual growth in their investment lending books below 10%.

This has since seen many Australian lenders increase interest rates, decrease maximum LVRs and review credit assessment policies.

But according to Lee, the decision by APRA was thoughtless.

“APRA made a suggestion and the banks took that opportunity to have knee-jerk reaction and if you have 35 lenders then you have 35 kneejerk reactions. That is all designed to cloud the issue,” he told Australian Broker.

“The issue is that Sydney and parts of Melbourne were out of control so APRA came out with a suggestion which could have been taken to say let’s do a postcode restriction in Sydney and those parts of Melbourne which are affected, however, the banks have taken it as a blanket, right across Australia approach.

“Outside of Sydney and Melbourne it is business as usual and always is so we have now put a blanket across those areas for no reason other than the fact that APRA got it wrong and probably should be held to account.”

But Lee says it hasn’t just been his investor clients who have been affected by regulatory intervention.

“It is a very complex market that’s for sure.

Not only has APRA penalised investors but they have also penalised owner-occupiers who have an interest-only home loan. They have also been penalised with an increase to their interest rate.

“That has got nothing to do with what APRA wants, that has got to do with profit and I worked it out before that it is a 5% increase to interest rates that they have actually applied to their entire existing book.

“When you consider there is trillions of dollars worth on investment loans in place, then it is not a bad gig.”

– before the bank would be able to lend to you.

“That would have stopped a lot of the speculation because the problem in Sydney and Melbourne particularly – and we are heading that way for Brisbane too – is speculation. When you come with speculation in the property arena, that is the mother of all evil and it will bring people down. We’ve got examples on the Gold Coast now where you have got units going for $600,000 which were sold for $1.1 million at the last sale.”

“Not only has APRA penalised investors but they have also penalised owner-occupiers who have an interest-only home loan. They have also been penalised with an increase to their interest rate” According to Lee, the better option would have been to leave interest rates alone and implement more specific restrictions.

“It wouldn’t need to be an interest rate rise; it could have been a restriction on the amount you can lend to a property,” he told Australian Broker.

“If you are buying a high rise apartment in Alexandria or Moore Park or any of the innercity Sydney suburbs, if it is existing it should have a slightly higher LVR available but if it is off-the-plan then it should be 70%. You’ve got to put 30% hurt money in – that being your money

A true one-stop shop

On top of providing home loan and property investment advice, Lee also has an in-house financial planning arm.

Lee says he decided to diversify into financial planning after he couldn’t find an external partner who shared his vision — and he has never looked back.

“Financial planning in particular and the insurance needs were outsourced to a number of different entities. However, they weren’t able to get that model right,” Lee told Australian Broker.

“The opportunity came for me when I met a

21

financial planner who understood what was in my heart and what was in my head and I had an opportunity to buy into his practice and then rename that. That has proven to be a really good model because more and more clients are lost in this very complex marketplace and need some really smart advice.”

When it comes to integrating the three areas of his business — mortgage broking, property investment advice and financial planning — Lee says it is all comes down to learning how to

prospect your database and keeping interested in your clients.

“We prospect our current database by asking open-ended questions. I have one employee who works full time for us doing our client reviews. In the Smartline franchise model you are supposed to conduct an annual review on all your clients but we have taken that one step further and do that twice a year,” he told Australian Broker.

“There is a whole range of things this is designed to do, but in a nutshell, it is a fishing

exercise. It is fishing for opportunities to refer that particular client back to the mortgage broking side of the business or the investment advice business or the financial planning and guidance part of the business.

“It is amazing how many people out there are at risk and might be on a $200,000 salary and they have no income insurance or no trauma or life or TPD insurance. Things do go wrong in our society, as we know, so you have got to be protected.”

22

MARKET WRAP MARKET TALK

APARTMENT BUILDING HITS 10-YEAR HIGH

GST INCREASE ON THE CARDS? What impact could a GST hike have on affordability?

THE POSSIBILITY of a higher GST rate has been slammed by one lobby group, which believes it would worsen housing affordability.

There has been speculation recently that the Federal Government is considering lifting the GST to 15%, but the Urban Development Institute of Australia (UDIA) claims that would add tens of thousands of dollars to the cost of new homes in Australia.

“At the current 10% GST rate, a new house sold at Australia’s median house price of $658,608 already includes a GST component of $59,873,” UDIA national president Cameron Shepherd said.

“Were the rate increased to 15%, that amount would rise to $89,810, an increase of almost $30,000. The impact would be even greater for cities like Sydney and Melbourne which have higher house prices,” Shepherd said.

He said the UDIA supported the government’s push to overhaul the country’s taxation arrangements and would like to see taxes such as stamp duty abolished, but more effective changes could be made rather than a GST increase.

“Broadening the GST base would improve its efficiency, and raise additional revenue that could be used to both provide relief to low-income earners, as well as assist in the phase out of economically damaging taxes such as stamp duty,” Shepherd said.

“Land taxes are another efficient revenue source, and lower-rate, broader-based land taxes could help provide a stable source of revenue to replace stamp duty and reduce

the reliance of state governments on upfront housing charges.”

While the UDIA may be against the idea of raising the GST, Catherine Simons, a director of accounting firm WSC Group, believes it is a possibility.

“I think an increase in the GST is definitely on the cards,” Simons said.

“If it was to be increased I do think stamp duty should be looked at. When the GST was introduced to begin with the motivation was that it would replace a lot of the state taxes, so an increase would give the states scope to look at getting rid of things like stamp duty.”

Simons said a trade-off for a higher GST at the expense of stamp duty may not result in a price rise like the one predicted by the UDIA. “If you look at a state like NSW and its average prices, if you increased the GST and scrapped stamp duty, the price of a new house would end up being around the same,” she said.

“There’s no GST on second-hand housing, so an increase could impact construction of new homes, but if it meant stamp duty was scrapped it would benefit those buying and selling second-hand homes.”

While she believes the GST will rise, Simons said what that would ultimately mean for other tax arrangements would depend on how the increased revenue was distributed.

“I do think there will be an increase in the GST sooner or later, but what will come with that will depend on the details of where the money will go and how much everybody gets.”

The prevalence of apartment development across the country has been illustrated by the release of the October Performance of Construction Index (PCI).

Compiled by the Housing Industry Association (HIA) and the Ai Group, the PCI measures whether the construction industry is in a period of expansion or contraction.

An index score of below 50 represents the construction industry in a contraction period, while a score above that represents expansion.

According to the latest PCI figures, the index enjoyed its third straight monthly increase in October, rising 0.2 points overall to 52.1 over the month.

The overall increase was driven by the building of apartments, which grew at the fastest pace in 10 years in October, jumping 9.2 points to 72.4. That offset a fall in building levels for detached housing, by 9.8 points to 47.

The increase in apartment construction means the index has kept its current streak of monthly improvements alive, and Ai Group policy head Peter Burn said it appeared likely the apartment sector would continue to improve.

“The higher level of activity in the apartment sub-sector was sufficient to extend the overall construction sector expansion into a third month,” Burn said.

“Expectations of further growth in the months ahead will be encouraged by the higher levels of new orders recorded for the apartment, engineering and commercial construction sub-sectors. This is a further sign of the long-awaited broadening of the base of economic growth,” he said.

Outside of the residential sector, construction also increased in the commercial and engineering sectors and HIA chief economist Harley Dale said despite a predicted drop-off in residential activity, the construction industry should continue to be an important part of the economy.

“The strong findings for apartments are consistent with the considerable pipeline of activity, while the overall trajectory for detached houses signals healthy construction in 2015/16, albeit off the cyclical peak of last year,” he said.

“There are signs emerging of a broadening strength to the construction industry – the results for the commercial and engineering construction sectors are encouraging.”

BY THE NUMBERS

230,298 A record 230,298 dwellings were approved in the 12 months to the end of September

Source: ABS

23

MARKET TALK

PRICE REVERSALS, FOREIGN BUYERS A CONCERN FOR AUSTRALIANS A new survey has revealed the issues causing concern for Aussie buyers WHILE SMALL price corrections have been predicted for some Australian real estate markets, it appears the general public has a more pessimistic outlook.

Results from the September quarter CoreLogic RP Data–TEG Rewards Housing Sentiment Survey showed that more than two-thirds of respondents were worried about the future of real estate prices in Australia, with 68% of respondents answering yes to the question, “In your opinion is Australia’s housing market vulnerable to a significant correction in values?”

While that is a high proportion of respondents, it is a decrease from the result of the June quarter survey, when 75% of respondents answered yes to the same question.

CoreLogic RP Data research head Tim Lawless said it was unlikely there would be a significant correction. However, he did point to relatively recent figures showing why some people may have concerns.

“While we don’t envisage dwelling values will fall substantially, the probability of declines in Sydney, and to a lesser extent in Melbourne, after such a strong run of capital gains isn’t unlikely,” Lawless said.

“Home values are already trending lower in Darwin and Perth. It was less than three and a half years ago that capital city dwelling values fell by 7.4% between October 2010 and May 2012,” he said.

Though the proportion of respondents who are concerned about a significant correction has fallen, so too has the proportion who believe prices will rise in in the next six months.

In the March quarter survey, 49% of respondents believed prices would trend

upwards in the following six months.

That fell to 48% in the June survey before dropping to just 40% in the September survey.

That has also coincided with a fall in the number of people who believe now is a good time to buy real estate, with 55% of respondents from the September survey believing that it is, down from 60% in the June survey.

Respondents had the most negative outlook for Sydney: just 29.7% believed it was a good time to buy in the harbour city. In comparison, more than 70% of respondents believed it was a good time to buy in the ACT, Adelaide, regional Queensland and Perth.

While recent research has pointed to a slowdown in foreign investors targeting Australian real estate, the survey results do show that the impact of offshore money on affordability is still a contentious issue for many.

Ninety-five per cent of respondents said they believed that foreign demand was pushing residential real estate prices higher, and 19% of respondents believed foreign buyers were placing “extreme” pressure on the Australian real estate market.

While there is some conjecture about the actual impact foreign buyers have on real estate prices, Lawless said the results showed that there needed to be more transparency from the government in showing the level of foreign buyer activity in the market.

“The latest statistics from the Foreign Investment Review Board haven’t been updated since the 2013/14 financial year,” he said.

BUILDING AND RENOVATING TO GET EASIER IN NSW Embarking on a building or renovating project in regional NSW is set to become an easier process after the state government announced changes to planning regulations.

NSW planning minister Rob Stokes this week announced changes to the Environmental Planning and Assessment Regulation 2000 that aim to help builders and renovators complete work more quickly by removing notice periods for complying developments.

Complying developments are projects that are assessed by a council or private certifier as meeting predetermined criteria, which allows approval for works to be granted much more quickly than for full development applications.

Under the changes, the 14-day pre-approval neighbour notification for residential complying developments will be removed and the pre-construction neighbour notification for new buildings and additions will be reduced.

Applicants will now be required to notify neighbours two days before construction starts; however, the government still recommends that builders and renovators have an open dialogue with those who are likely to be affected by the works.

Stokes said the changes had been implemented after the state’s planning department held a period of consultation with stakeholders.

“We listened to councils, industry and businesses who told us previous notification requirements made complying development in regional and rural areas more expensive, time-consuming and confusing,” Stokes said.

DID YOU KNOW?

30%

A recent Credit Suisse analysis predicted Chinese demand for Australian property could fall by as much as 30% should the country’s economy weaken

Source: Credit Suisse

24

MARKET WRAP CFO CONFIDENCE PLATEAUS

FINANCIAL SERVICES

ASIC TAKES AIM AT ADVERTISING The regulator has hit companies with fines over their ads to consumers

ASIC has taken aim at financial services companies over their advertising.

ASIC said the Federal Court had ordered Superannuation Warehouse of Australia Pty Ltd (SWA) to pay a $25,000 fine for “Free SMSF Setup” advertising on two websites it operates.

The company, which provides online accounting and administration services for self-managed super funds, admitted that the statements were false and misleading. It also consented to declarations and additional orders requiring it to implement a compliance program, post notices on the websites about the proceeding, and notify consumers who applied for the free SMSF set-up.

The Court found that the advertising was false, misleading and deceptive because it represented that the company would set up an SMSF at no cost. In reality, SWA’s online application form for free SMSF set-up could not be submitted without authorising SWA to be the administrator, for which there was a fixed monthly fee. SWA also requested that applicants put in place a payment plan for monthly administration fees.

“Deciding to establish a self-managed superannuation fund is a significant financial

decision. Consumers should not be misled by advertising, including online. ASIC considers that terms such as ‘free’ convey a strong impression to consumers and should not be used where there is any charge or cost associated with the product or service advertised,” ASIC deputy chair Peter Kell said.

The regulator has also hit an online foreign exchange trader with a $30,600 fine for its advertising.

OCM Online Capital Markets Pty Ltd has paid the penalties after ASIC issued three infringement notices for false and misleading online advertising, the regulator said. The ads promoted OCM’s margin foreign exchange trading platform.

ASIC said OCM made a number of claims in its ads and emails, including “$2533 in Just 7 Days!” and “Learn how you can increase your monthly income”. ASIC deemed the ads misleading.

“Margin foreign exchange and derivative trading is high risk and gives volatile returns.

Consumers should not be misled by false claims about the level or consistency of returns achievable from such trading,” ASIC commissioner Greg Tanzer said.

Confidence among Australia’s chief financial officers appears to have plateaued as businesses are plagued by concerns over China.

Deloitte’s latest CFO Survey has found that a net 5% of CFOs in Australian businesses reported that confidence levels had increased in Q3. This sees the proportion of CFO confidence recede to 2014 levels.

The result is a decline from a net 24% in Q2 and 21% in Q1.

China’s economy seemed to be of particular concern for CFOs, with a net 68% saying it had hurt confidence.

“Net 68% of CFOs reported that news from China was a negative influence on optimism, the most downcast response since early 2013, when China had released its worst growth figures in nearly 15 years,” Deloitte managing partner Sydney Dennis Krallis said.

“Now, growth figures have fallen below those levels, and with global growth depending heavily on China’s smooth economic transition, it’s perhaps not surprising that uncertainty has re-emerged. More than half of CFOs believe current levels are above normal or high.”

Krallis said commodity prices weighed on CFO optimism amid dwindling Chinese demand.

But there were bright spots in the numbers, with low interest rates and a change in leadership for the government sparking optimism.

“Low interest rates, a weak dollar and the change in leadership in Canberra, with the widely held perception that the new-look government is more open to tax reform and innovative policy, have all helped to temper the China impact. These local forces shouldn’t be underestimated, and we believe it will take time for their true positive potential on confidence to be realised,” Krallis said.

WORKING HARD

68%

A net 68% of CFOs reported that news from China was a negative influence on optimism

Source: Deloitte

RESOURCES DUE FOR A RALLY? A major brokerage firm has claimed commodities could actually rebound in the year ahead.

Invast Australia’s November Investment Committee Monthly Outlook has predicted commodities prices could be nearing the bottom and due for a recovery in the first half of 2016. The company predicted that diversified stocks like BHP Billiton could rebound in the year ahead.

“We don’t see a sudden recovery, but we suspect that prices are near rock bottom levels and the second half of 2015 could be the base period in which they come back from,” the report said.

The company conceded that energy and bulk commodities had experienced

“horror numbers”, and that shareholders had been hit hard. But Invast said the fortunes of commodities companies could turn around in the new year.

“Glencore’s panic selling may have been a sign of the bottom. The rally was purely ridiculous, we would be completely staying away from that type of volatility. But BHP in the mid-$20 range is a different matter. We spoke about it as an attractive exposure to consider next year at our end of month October webinar. Our team is watching price action very closely and we wouldn’t be surprised to see a slightly positive outperformance in earnings (considering market expectations are already low) in February,” the report claimed.

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26

SPOTLIGHT VIDEO SPOTLIGHT

ONE YEAR ON

BROKERS GAINING MARKET POWER

12 NOVEMBER 2014

What a difference a year makes ... or not.

Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago

MFAA research shows brokers are responsible for 67% of the growth in the mortgage market for the year to September 2014

$46bn

17 AUGUST 2015

Research shows that out of the $46bn total increase in mortgage lending recorded by the ABS for the 12 months to June 2015, brokers originated $30.5bn

70% 5 NOVEMBER 2015

Patrick Marion, chief executive of Citiwide Homeloans, predicts that broker market share will rise to 70% over the coming five to 10 years

Aaron Christie-David

64.7% 17 FEBRUARY 2015

Broker share of growth in the mortgage market sits at 64.7% for the year to December 2014

23 SEPTEMBER 2015

A Digital Finance Analytics report finds that three-quarters of consumers looking to refinance will consider using a mortgage broker

FROM MARKETING TO MORTGAGE BROKING Aaron Christie-David took a unique path to entering the mortgage industry. A former career in communications with the Commonwealth Bank eventually led Christie-David to opening his own Mortgage Choice franchise. In the first of a series of ‘Head to Head’ interviews for Australian Broker TV, Christie-David explained what drew him to the industry.

“Mortgage broking as an industry is relatively new, yet the proposition is so strong. It’s no cost to the client, and is helping them with personalised service through one of their biggest decisions, which is buying a property,” he said.

Christie-David said his path from marketing to mortgage broking may be unique, but it prepared him well for his current role.

“If you look at my background in marketing – I’ve been with Wizard Home Loans and Commonwealth Bank – I feel I have the entrepreneurial spirit from Wizard matched with the discipline of a big bank. Forge those two together, and here I am forging my own path now,” he said.

And Christie-David said his marketing background also gave him insight into the channel.

“My background has always been third-party lending and marketing on home loans. It’s a fairly unique background, in that I’ve always had exposure to the broker channel,” Christie-David said.

Since making the move, Christie-David said he’s enjoyed becoming part of the broking community.

“I love it. I wish I’d made the move earlier, to be honest. The broker community is so unique. It doesn’t matter if you’re Aussie, Mortgage Choice or independent, the community spirit is there.”

27

FORUM

CLAWBACKS BACK IN THE SPOTLIGHT A debate is raging over the necessity of clawback clauses

THE AUSTRALIAN BROKER forums have played host recently to a spirited debate over the necessity of clawback clauses. The argument was sparked when FBAA chief executive Peter White said clawing back commission was fundamentally wrong. This led to a retort from Suncorp’s Steven Degetto, who said reasonable clawbacks were necessary. MFAA chief Siobhan Hayden also weighed in, saying it was unreasonable to expect clawbacks to be universally abolished. Brokers, unsurprisingly, had much to say on the issue.

James B said brokers and smaller lenders could use their market power to make clawbacks a thing of the past.

“Clawbacks are a bitter pill. Why not appeal to second tiers in the first instance? It would take half a dozen lenders to support this strategy and reap the benefits of good PR and increased volumes. The majors could fall into line or lose market share.”

Steve McClure said banks should move to a user pays model for applications to avoid the need for clawbacks.

“Does anyone else see that if lenders charge borrowers, clients are less likely to refinance and the costs are paid at the time incurred?

And our valuations system would work better by not screwing them down on cost. If all lenders charged upfront fees, no one loses, apart from the client that chose to terminate and switch a contract.”

Simon McGrath said brokers should pass on clawback costs to clients.

“There is a simple solution. Simply make the customer liable for payment of any clawbacks that you suffer as a broker in a side agreement with the client at inception of the loan. Any clawback is an economic cost to your business.

Repayment damages your business. Brokers pussyfoot around on this. Toughen up!”

But Rocky W said trying to recoup clawbacks from clients was “the grubby side” of mortgage broking.

“Fed up with having to try and convince clients that what they signed is enforceable by law when it comes to clawbacks. I’ve had Sydney clients this year that have sold their properties for unbelievable prices when 12 months ago they weren’t even thinking of selling. And the only person who loses on the deal is me. I understand the education process but a client won’t hand over money without a fight. And who has the time or the money to fight? This is the grubby side of the industry, and I’ll support any group or body that will continue to challenge the banks on clawbacks.”

Jim said that if brokers concentrated on writing more loans isolated clawbacks wouldn’t be an issue.

“If you write enough loans, isolated cases won’t worry you too much. It’s not unreasonable for the lender to recoup commission when a loan has a very short shelf life.”

BEST COMMENT ONLINE CLAWBACK FOR BAD BANK BEHAVIOUR While Suncorp’s Steven Degetto and the MFAA’s Siobhan Hayden said reasonable clawbacks were not going anywhere, one commenter expressed frustration over clawbacks that happened as a result of bad service on the part of the banks.

“The clawback I dislike is the clawback when the client has left the bank because of the bad service they have received from the bank.

What needs to be done is work out why the client is leaving the bank. If it is because the broker is refinancing to another bank, then I feel clawback is justified provided it is not because the client has come back to the broker and said that they are unhappy with the service they are getting from the bank. There is no justification for a clawback when the clawback just turns up and we contact the client and they say they left because the service from the bank was terrible, and they did not come back to us because the bad service they received from the bank was a reflection on us. It should not be one size fits all. We should look at who is at fault for the client leaving the bank. A lot of the time it is the bank that is at fault.”

John Whitten on 6/11/2015 at 9:48AM BROKERS TRACKING WELL The Credit & Investment Ombudsman’s newest report shows brokers and aggregators accounted for only 6.1% of all consumer complaints lodged during the financial year.

“Whilst I do not know the exact total number of loans written each year by all mortgage brokers in Australia, I am confident that it would be in the hundreds of thousands. COI received 294 complaints during the year. That equates to something like 0.01% or 0.02%. Waste of time to think about it.”

Stephen Dinte on 27/10/2015 at 10:01AM

28

PEOPLE CAUGHT ON CAMERA The Australian Mortgage Awards were held recently at Sydney’s Star Casino.

The event honoured the industry’s best, and featured MC Andrew Voss.

Photography by Simon Kerslake & Bill Green

29

30

PEOPLE HOT SEAT

DAMIEN ROYLANCE The winner of this year’s AMA for Broker of the Year Productivity discusses how pouring beers at the Australian Open led to a career in mortgages . What has been the biggest lesson you have learnt in your career as a mortgage broker?

Provide a consistent, quality level of service to all clients no matter who A they are. In my experience the best way to win new business in a world of referrals is to exceed clients’ expectations so they are excited about telling their friends and family. This rings true with lenders and stakeholders, as we want to build long lasting relationships with everyone involved in the transaction.

Q

What has been your most rewarding client experience?

A young couple with three kids, of which the youngest suffered A from a disability, who had been told that they wouldn’t be able to get a mortgage. The mother was a full time carer, which left the father as the only source of income. Even though they didn’t earn a lot they still managed to save a decent deposit. We got them approved with a mainstream lender and when they purchased they were ecstatic.

A phone call I won’t soon forget.

Q

You just won Broker of the Year – Productivity at the AMAs. What are your top three tips for making the best use of your time?

I do 95% of my meetings in the office which eliminates dead time A in travel and allows for a much more productive day. I will often switch off all of my communication devices and dedicate periods of my day to contact leads and work on hard deals without distraction.

In this day and age notifications are the biggest time thief of all as it takes so long to get back on task. Before submitting any deal, I do comprehensive research to make sure it’s going to be approved. We are very firm believers in only submitting deals that we know meet the criteria. We are constantly looking at ways of improving our systems and processes and in 2016 we will be concentrating on introducing more technology to increase efficiency.

Q

What inspired you to become a mortgage broker?

I was serving beers in the Heineken Bar at the Australian Open when a A family friend suggested I contact him as he thought I’d be good at broking. Since becoming a broker almost 10 years ago, I’ve loved the satisfaction of helping hundreds of people get into their home or reach their investment objectives.

Q

Q A

What is your biggest fear?

Collingwood won’t win another premiership, as I’ve been to three losing Grand Finals and yet to see us win!

If you could have dinner with any three people (dead or alive) who would it be and why?

Michael Jordan. He was my childhood hero and I’d hope he could give me A some tips to improve my jump shot.

My wife Amy. Since our baby girl Millie came along our nice dinners are few and far between.

Jerry Seinfeld. Every table needs some comic relief.

Q

What would you be doing if you weren’t a mortgage broker?

I’d like to think I’d be a professional sportsman but more than likely I’d be A a personal trainer. It’s what I studied at university and the career path my eldest brother took.

Q